A: When it comes to investing, the past is practically irrelevant. It's the future that matters.

One of the most difficult aspects of trying to value a stock is estimating what a company's future profit and revenue will be. Some companies make things a bit easier on investors by providing guidance, or disclose what the officers think the business will look like in a quarter or year.

Some investors are skeptical of guidance, since, it would give the management of a company a way to manipulate expectations. For instance, CEOs might give an overly optimistic view of the future, which would drive up the stock price, and allow them to sell stock.

But while that danger is a theoretical possibility, in reality guidance does help the investor, says research from the MIT Sloan School of Management. The professors found investors benefit when companies give guidance about the future because it decreases the company's cost of capital. Investors were willing to pay more for the shares because of the greater visibility into the future. Investors take the additional information to more accurately price the stock, says co-author MIT professor Nemit Shroff. "They don't fool the market, but rather help inform the market, benefitting investors and the issuing firm," he says.